The Securities Appellate Tribunal has reserved an order pertaining to a case filed by software firm Zenith Infotech Ltd against a SEBI order to furnish a bank guarantee of $33 million (about Rs 190 crroe) by April and restrain the company's promoters from trading in the stock market.
SAT members Jog Singh and A.S. Lamba maintained their previous order granting interim relief to Zenith against the market regulator’s bank guarantee order.
Earlier in March, SEBI barred promoters of the company from the securities market for allegedly diverting $33.93 million, out of $48 million sale proceeds of the company’s Managed Services Business division “for purposes that were not even remotely connected to the authorisation of the shareholders”.
Jog Singh, who was presiding over the case, also observed that the market watchdog the Securities and Exchange Board of India was well within its powers to pull up the company after the company’s lawyers argued that SEBI had overstepped its jurisdiction and deviated from general guidelines of non-interference in a sub-judice matter.
The company board in an EGM in December 2010 had passed a resolution for raising about $83 million in two tranches. Despite realising money from the sale of its business division, the company defaulted on its FCCB (foreign currency convertible bonds) repayment obligation, yet made no disclosures to the exchanges.
The default came to light when the BSE raised the matter with Zenith in October 2011, to which the company responded that it had defaulted on its payment of $33 million due in September 2011. During this period the company’s stock crashed to Rs 93 from Rs 190 and further halved to Rs 45 by November end.